Thursday, November 30, 2023

Since the year 2020, the Ethereum blockchain has experienced consistent expansion in the area of liquid staking, with 23 liquid staking derivatives (LSD) platforms currently holding 12.4 million ether, worth more than $20 billion, as of early October 2023. The leading three platforms in this sector—Lido, Rocket Pool, and Coinbase’s Wrapped ETH—have a combined control over 11.041 million ETH, which represents an overwhelming 89.18% of the total ether engaged in liquid staking.

Trio of LSDs Command 11 Million Ether

Approximately seven days prior, the aggregate amount of Ethereum (ETH) in the custody of liquid staking derivatives exceeded 12 million, adding 370,000 ETH in a mere five days. Liquid staking derivatives function as decentralized entities that offer users the capability to stake their ETH in a liquid form, thus preserving asset liquidity and flexibility while also generating staking rewards.

As it stands, Lido, Rocket Pool, and Coinbase’s Wrapped ETH platform collectively dominate with an 89.18% share of the entire LSD market. Established in 2020, Lido Finance is the predominant holder of Ethereum, securing 8.79 million ETH.

This implies that Lido holds ether valued at $14.55 billion, making up 70.96% of the entire liquid staking market. In return for their ETH, participants obtain Lido’s own staked ether token (STETH). Currently, the market valuation of STETH places it among the top ten tokens when compared against those with the largest market capitalizations.

STETH is held across 269,080 unique addresses and has been involved in approximately 1.15 million transfers. The circulating supply of STETH is 8,790,000, and the top 100 holders own a substantial 69.26% (6,088,042.02 tokens) of the supply. A report released by Coingecko on September 29, 2023, cites STETH as having an average yield of 4.6%.

Coinbase’s Wrapped ETH platform holds the second position among LSD platforms and currently has 1.3 million ETH, valued at $2.26 billion. The circulating supply of CBETH tokens stands at 1,297,211 and is held in 40,653 distinct addresses. Since its inception, CBETH has seen 210,532 transactions.

In terms of distribution, CBETH is comparatively more concentrated than STETH, as the top 100 holders possess 96.43% (1,250,865.13 tokens) of the circulating supply. During August 2023, the average yield for CBETH consistently remained above 3% and exceeded 4% multiple times over the past 12 months.

Rocket Pool ranks as the third largest holder of Ethereum among LSD platforms with 951,264 ETH. It holds a 7.68% market share in the LSD sector, while Coinbase has a 10.48% share. Users exchanging ETH via Rocket Pool receive a token called RETH, and currently, the total supply of RETH is 529,872.

RETH is held by 18,784 unique addresses and has been part of 197,928 transactions. The top 100 holders control 67.91% (359,823.38 tokens) of the circulating RETH supply. Following Lido, Coinbase, and Rocket Pool, other notable LSD platforms include Binance Staked Ether, Frax Staked Ether, and Stakewise, each holding a significant amount of Ethereum.

Position of LSDs in Decentralized Finance

Liquid staking derivatives continue to make inroads into the decentralized finance (DeFi) landscape, offering users the opportunity to earn staking rewards without any minimum requirements. Coingecko’s research reveals that the leading eight LSD platforms have generated an average annual percentage yield (APY) of 4.4% since January 2022.

Criticisms and Advocacies

While LSDs have been met with criticism for allegedly promoting centralization of supply and validators, proponents argue that these platforms actually enhance the security and decentralization of Ethereum by diversifying the validator pool.

We invite your thoughts and viewpoints on the dominant trio of LSD platforms and their associated tokens in the comments section below.

Frequently Asked Questions (FAQs) about Ethereum’s liquid staking market

What is the focus of the article?

The article provides an in-depth analysis of Ethereum’s liquid staking market, which is valued at over $20 billion. It particularly emphasizes the dominance of three platforms: Lido, Rocket Pool, and Coinbase’s Wrapped ETH.

Who are the major players in Ethereum’s liquid staking market?

The major players dominating Ethereum’s liquid staking market are Lido, Rocket Pool, and Coinbase’s Wrapped ETH platform. These platforms collectively hold an 89.18% share of the entire market.

How are liquid staking derivatives (LSDs) defined in the article?

Liquid staking derivatives are described as decentralized platforms that allow users to stake their Ethereum in a liquid form. This provides users with the flexibility to easily access their assets while still earning staking rewards.

What are some of the criticisms against liquid staking derivatives?

The article mentions that one of the criticisms against liquid staking derivatives is that they potentially foster the centralization of supply and validators. Critics argue that this could undermine the decentralized nature of blockchain platforms.

What do proponents say in favor of liquid staking derivatives?

Proponents argue that liquid staking derivatives contribute to the decentralization and security of Ethereum. They claim that these platforms can diversify the validator set, thereby enhancing the network’s resilience and security.

How has the performance of Lido been characterized?

Lido is identified as the leading entity in Ethereum’s liquid staking market, holding 8.79 million ETH, which equates to 70.96% of the market share. The token associated with Lido, known as STETH, has an average yield of 4.6%.

What kind of yields are being generated by these platforms?

According to research by Coingecko, the top eight liquid staking platforms have produced an average annual percentage yield (APY) of 4.4% since January 2022.

What does the article conclude regarding the future of liquid staking derivatives?

While the article does not explicitly predict the future of liquid staking derivatives, it does indicate that they continue to establish their niche within the decentralized finance (DeFi) sector, offering avenues for earning without minimum prerequisites.

More about Ethereum’s liquid staking market


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